Orion Corporation has established the following standards for the prime costs of

Question

Orion Corporation has established the following standards for the prime costs of one unit of its chief product, dartboards. Direct material Direct labor Total Standard Quantity 8.00 pounds 0.25 hour Standard Price or Rate $1.75 per pound $8.00 per hour Standard Cost $14.00 2.00 $16.00 During June, Orion purchased 160,000 pounds of direct material at a total cost of $304,000. The total wages for June were $42,000, 90 percent of which were for direct labor. Orion manufactured 19,000 dartboards during June, using 142,500 pounds of the direct material purchased in June and 5,000 direct-labor hours. Required: Compute the following variances for June. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "O" for no effect (i.e., zero variance).) > Answer is complete but not entirely correct. Direct-material price variance 24,000 * Unfavorable Favorable 16,625 Direct-material quantity variance Direct-material purchase price variance Direct-labor rate variance Direct-labor efficiency variance |(2,200) |(2,200) Unfavorable Favorable Unfavorable 5. $ 2,000

Explanation / Answer

1. Direct materials price variance = AQ *(AP-SP) =142500*((304000/160000)-1.75) = 21375 Unfavorable

3. Direct materials purchase price variance = Actual quantity purchased *(AP-SP) = 16000*((304000/160000)-1.90)=-24000 =24000 Favorable

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